Home Loan Comparison

Getting it right doesn't have to be risky

Home Loans and mortgages. When your parents took out a home loan, the world was a completely different place. Your parents probably needed at least 20% deposit and had to fight for acceptance from the few home lenders that existed. Their loan was even more limited than today’s average basic and your parents probably stuck with it for the full term of the loan, which was usually 20 years.

Today however, the dozen different home loans that might have been available to your parents have given way to several hundred. The options within each of these home loans has expanded and competition between lenders is fierce. The size of your mortgage is likely to have grown dramatically as the housing affordability index has plummeted by almost 50% since 1985. The difference between the right loan and the wrong loan can easily cost you $5,000 in the first few years and this cost can balloon horribly if you look across the 30 years it may take you to repay your mortgage. Worse still, a bad choice could cost you your happiness and your home. However carefully choosing your mortgage increases your chances of a happy ending.

There are three methods Australians commonly use to choose a home loan. The first is by guessing based on recommendations from friends, family, and people like me that write generic articles. The second is to hunt out a good mortgage broker who will work more closely to understand your individual needs. The third, which I will try to cover here, is to grow your knowledge on the things that really matter so you can make an educated decision. Even if you use a mortgage broker, you should still take the time to understand the basics. It will make it easier for you to discuss your requirements and help you rate the quality of your broker. Sadly, not all mortgage brokers are good brokers and not all lenders tell you everything you need to know.

So where do you begin? Without delving into the range of hidden catches and clever lender tricks, there are three basic factors that enable you to properly compare home loans. Contrary to advertising claims or what the spruikers say, you can’t have the best of everything in a home loan. Lowest cost often reduces the performance or fit of your loan (or it is not as cheap as you think it is), the most flexible loan will not be the cheapest and so on. It is a matter of working out what is most to least important to you. Once you understand and prioritise these, you can choose a loan that achieves the right balance between cost, performance, and fit for your individual needs. With this done, you will be well on the way to finding a loan that saves you time, stress, and money.